Post Termination Restrictions: Top Tips

Askews Legal LLP are your local Solicitors in Coventry, today we are reviewing Employment Law and in particular post termination restrictions.

Post termination restrictive covenants are often found in contracts of employment of key members of staff. Such restrictions may seek to prevent solicitation of customers/clients, suppliers, other employees, or general competition for a defined period after termination, in order to protect the employer’s confidential information, customer connections, goodwill and workforce stability. You must be able to demonstrate that you have a legitimate interest that you are seeking to protect and that the protection sought is no more than is reasonable to avoid such restrictions being in restraint of trade and therefore void.

We have set out below our top tips summarising best practice when drafting or seeking to enforce post termination restrictions:

1. The reasonableness of a restriction is considered at the time the covenant was entered into by the parties, not in light of subsequent events or at the time a party is seeking to enforce the same. When an employee receives a promotion or changes job role, any post termination restrictions in their employment contract should be reviewed and if necessary, amended.

1. Be clear on what the legitimate business interest is you’re seeking to protect. It may be confidential information, trade connections with customers, a stable workforce or all of these. It is helpful to include introductory wording clarifying the interests you are seeking to protect.

1. Ensure the restrictions are no wider than necessary to protect your legitimate business interest. Consider the interest you are trying to protect, the role of the individual on a day to day basis, the confidential information they have and the influence they exert over customers/clients or work colleagues. Do you not use a generic set of restrictions for all employees. Ensure they are tailored to each individual.

1. The restrictive period should be long enough to keep the employee out of the picture whilst you recruit a replacement, train them up and build relationships between your new employee and your customers/clients. Facilitate a proper handover to ensure that at the end of the restrictive period, the risk the former employee poses is substantially reduced.

1. The covenants may not be binding if you are in breach of the employee’s contract of employment. For example, if the employee resigns in response to your repudiatory breach, you may not be able to rely on any restrictions intended to survive the termination. Or, if you summarily terminate the employee’s employment and make a payment in lieu of notice to them where the contract does not give you the right to do so.

1. When an employee resigns or you terminate their employment, write to them setting out the arrangements for their departure and draw their attention to the fact they are bound by post termination restrictions, enclosing a copy of their employment contract containing the restrictions. Monitor whether customers/clients are terminating any agreement they have with you or stop doing business with you. Monitor the employee’s emails if appropriate.

1. If you believe an employee is breaching their restrictions, act promptly and seek urgent legal advice. Monitor their movements and social media profiles. Keep evidence of any breach and a record of all conversations and loss incurred. Consider sending a ‘cease and desist’ letter reminding the employee of their restrictions and the consequences of breaching them. Enforcement of restrictions is usually through an application for injunctive relief. Any delay in addressing the matter is likely to be prejudicial to an application for an injunction. You may also be able to seek damages from the employee for breaching their restrictions as a separate course of action to an injunction.

1. Read, read and re-read. Avoid clumsy and ambiguous wording. Consider the application of the restrictions in different scenarios and whether they are suitable. Are they reasonable? Does the employee understand them? Encourage the employee to seek independent advice if in doubt.

If you require a review of any of your post termination restrictions, contracts of employment or any specific advice in respect of an employee’s contract or enforcing the terms, please contact one of our employment Solicitors in Coventry Lianne Payne, Head of Employment: